Soybean oil prices have fallen 10% since Monday, following a drop in prices for other vegetable oils

The collapse of oil prices shocked the world market, since there are not many fundamental reasons for the sharp drop in quotations, and the main factor of pressure was technical sales and the transition of traders from agricultural products to other assets against the background of signs of a banking crisis in the USA and the EU.

On Wednesday, the US Federal Reserve increased the base interest rate by 25 bps. to 4.75-5% per annum, which is the highest level since 2006, when it reached 5.25%. Markets were worried by the US Treasury Secretary’s statement that a US default would lead to a loss of confidence among international partners in both the US and the dollar as a reserve currency.

The decline in vegetable oil prices accelerated, and soybean and palm oil fell by 10% yesterday.

May palm oil futures on Bursa Malaysia fell 2.66% to a 6-month low of 3,569 ringgit/t or $808/t yesterday, losing 9.8% in price for the week.

On the Chinese stock exchange in Dalian, soybean oil futures fell by 1.9% yesterday, and palm oil futures fell by 3.2% on data about a possible increase in palm oil production in Malaysia and Indonesia due to better harvests than last year.

May soybean futures in Chicago fell 4.5% to a 15-month low of $1,152/t yesterday, having lost 10% since Monday and 16.8% for the month. Soybean oil prices were higher than palm and sunflower oil, but technical sell-offs pushed quotes down to competitive levels, which will strengthen demand in the near term.

An almost two-fold reduction in soybean production in Argentina will drastically reduce the supply of soybean oil and meal on the world market. According to the estimates of the Agriculture Secretariat, in February, the amount of soybean processing in the country decreased by 38% compared to January, from 2.6 to 1.6 million tons, the production of soybean oil reached 301.8 thousand tons, and meal – 1.1 million tons.

In Ukraine, which is the world’s largest exporter of sunflower oil, 916,000 tons of sunflower were processed in February, which is 2% more than in January, but is the second lowest indicator of the current season. The reason for the low rates of processing is the complication of the “grain corridor”, the active export of seeds, the decrease in demand and export prices for sunflower oil to the level of $1,020/t with delivery to buyers or $900-930/t FOB – ports of Ukraine.

During the first half of the 2022/23 MY, sunflower processing in Ukraine was the lowest in the last 8 seasons at 6.5 million tons, while exports reached a record 1.54 million tons. Given the collected 10 million tons and export forecasts of 2.5 million tons , at the end of the season, 3-4 million tons of sunflower will remain free for processing, taking into account temporary stocks, which will be enough for 3-4 months of work of enterprises, although they could process more than 2 million tons of seeds per month.

The decrease in exchange prices will activate purchases of sunflower and soybean oil on the physical market, especially against the background of reduced offers from Ukraine and Argentina due to a decrease in production volumes.

Tags: soybean oil, EU, prices, Malaysia, palm oil, USA, Argentina, Ukraine, sunflower oil